China forbids banks to transact in Bitcoin

Weeks after saying it has no plans to legitimize the virtual currency, People's Bank of China has now banned financial institutions from handling any form of Bitcoin transaction, citing its association with criminal activities.

People's Bank of China has officially outlawed Bitcoin transactions among local banks and financial institutions, pointing to the high risks of money laundering and potential association with illegal activities.

Online community can continue to transact in Bitcoins, but will bear associated risks.

Noting that the virtual currency was "limited" by its anonymity and lack of a central monetary controller, the central Chinese bank said it had issued an advisory to all banks and financial institutions in the country, forbidding them from handling any Bitcoin transactions.

In considering all these points, among several others, the central bank concluded the risks associated Bitcoin meant the currency could not meet the requirements to be recognized as part of China's financial system.

It said it would not stop the online community from transacting with Bitcoin, but warned that these users should be prepared to bear the risks associated with the currency.

People's Bank of China said it would work with the relevant ministries, regulatory boards, and financial institutions on identifying the necessary steps to ensure the implementation of its advisory note. Until then, all banks and financial firms should assume responsibility for advising the public on the use of Bitcoins.

The country is home to the world's largest Bitcoin trading platform, via BTC China.

Just this week, a website selling contraband goods disappeared with a Bitcoin haul estimated to be worth as much as US$100 million. Sheep Marketplace, which emerged after the Silk Road website was taken down by U.S. authorities, claimed it was a victim of a theft, though some believed its administrators had scammed its vendors, most of whom had traded drugs and guns on the website.

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